(MENAFNEditorial)
China's metals industry is set to face more pain ahead in the face of cooling Chinese economic growth and Beijing pledge to induce more supply discipline in heavy industry.
We expect China's metals industry to come under pressure from cooling Chinese economic growth over the coming years. More domestic smelters will struggle to survive in the face of falling profit margins sluggish demand and waning support from the local governments. The rebalancing of China's economy away from fixed asset investment and towards private consumption will significantly drag on demand growth for construction-related materials. Industrial metals such as steel and nickel will be particularly affected given their heavy exposure to the construction sector.
We forecast Chinese real GDP growth to average 6.3% between 2014 and 2018 compared with an impressive average growth rate of 10.1% per annum over the past decade. In our view attempts by the Chinese government to arrest the structural slowdown in the country's economy will only cushion the impact of an economic slowdown rather than revive a growth upturn.
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We believe the Chinese government's plans to consolidate the metals industry will continue to gain traction in the coming quarters. For instance Chinese policy makers plan to eliminate 28.7mn tonnes (mnt) of steel-making capacity and 0.5mnt of copper smelting capacity in 2014 (see chart below). Consolidation of the industry will be further driven by the slump in profit margins tightening of credit lending and stricter regulations aimed at curbing environmental pollution in heavy industry. As a result state-owned companies which already enjoyed a dominant role in the mining and metals industry will emerge more prominent over the coming years.
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Report Table of Contents:
BMI Industry View
BMI Indsutry View
SWOT
Metals SWOT
Industry Forecast
Steel: Consolidation Ahead
Demand: Weakness Ahead Longs To Underperform
Production: Boom Years Are Over
No Sustainable Lifeline From Exports
Production To Shift Westwards
Table: China - Steel Prices (USD/tonne Domestic Price Unless Stated Otherwise)
Table: China - Steel Production & Consumption Forecasts
Table: China - Steel Industry 2005-2012 (kt)
Aluminium: Expanding & Shifting West
Table: China - Aluminium Production Consumption & Balance
Copper: Slowdown In Place
Economic Slowdown To Hit Consumption Growth
Falling Margins To Curb Output Growth
Table: China - Refined Copper Production Consumption & Balance
Lead: Autos Sector To Lend Support
Table: China - Refined Lead Production Consumption & Balance (kt unless stated otherwise)
Nickel: Growth To Slow As Economy Rebalances
Table: China - Refined Nickel Production Consumption & Balance (kt Unless Stated Otherwise)
Tin: Demand Growth To Prove More Resilient
Table: China - Refined Tin Production Consumption & Balance (kt Unless Stated Otherwise)
Zinc: Hit By Faltering Steel Sector
Table: China - Refined Zinc Production Consumption & Balance (kt Unless Stated Otherwise)
Regulatory Development
Table: Political Overview
Commodities Forecast
Commodity Strategy
Iron Ore: Chinese Stimulus Not A Game Changer
Steel: Gradual Rationalisation Insufficient To Boost Prices
Aluminium: Recent Rally Unlikely To Persist Into H214
Copper: Bearish Forecast Appears Well Placed
Lead: Picking Up Autos Sector Tailwinds
Nickel: Recent Rise To Fall Back In H214
Zinc: Potential Test Of Resistance In Coming Weeks
Table: Select Commodities - Performance & BMI Forecasts
Steel Price Forecast
Table: BMI Steel Forecast
Short-Term Outlook
Core View
Global Steel Glut To Persist
Production: Rationalisation In The Long Term
Consumption: Growth Decelerating
Excessive Chinese Exports
Growing Arbitrage Between East & West
Risks To Price Outlook
Table: Steel Data & Forecasts
Table: Global Steel Prices By Region & Product US$/tonne (ave)
Competitive Landscape
Table: China - Largest Listed Metal Producers
Company Profile
Baoshan Iron & Steel
Table: Baoshan Iron & Steel - Key Financial Data
Angang Steel
Table: Angang Steel - Key Financial Data
Aluminum Corporation of China (Chalco)
Company Overview
Latest Financial Results
Table: Chalco - Key Financial Data
Methodology
Cross Checks
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